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November retail inflation below 6% for first time this year

Dec 12, 2022, 09:00 pm

The annual retail inflation eased below central bank's upper tolerance level for the first time this year in November amid a softer rise in food prices, surprising economists, with some expecting a pause in rate hikes.

Annual retail inflation rose 5.88% in November from 6.77% in the previous month, government data showed on Monday. Analysts in a Reuters poll had predicted a November reading of 6.40%.

Food price inflation, which accounts for nearly 40% of the consumer price index (CPI) basket, eased to 4.67% in November from 7.01% in October.

That was mainly due to a decline in prices of fruit and vegetables. However, prices of cereals, pulses and eggs continued to rise.

Global Brent crude prices have fallen nearly 30% since August.

Retail inflation had been above the upper end of the Reserve Bank of India's (RBI) 2%-6% tolerance band since January, mainly due to supply shocks caused by the Ukraine war, which started in February. It hit an eight-year high of 7.8% in April.

To rein in inflation, the RBI has raised interest rates by 225 basis points, including a 35 basis points hike last week.

The RBI recently wrote a letter to the government explaining the reasons for failing to contain inflation within the set band for three successive quarters. The Indian government said it would not publish the letter.

Some economists expect inflation to hover around the 6% mark in the coming months and forecast the central bank would pause rate hikes at the next meeting in February.

Also on Monday, India posted a 4% annual contraction in industrial output for October, its worst performance in 26 months, after revised growth of 3.5% in September, due to rising interest rates and slowing global demand.

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